Income growth at lowest level since late 2010

Ben Southwood
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CONSUMERS came in for a hammering in September, data from Lloyds TSB showed today, as annual income growth hit its lowest level since December 2010.

Real discretionary spending power dived 0.9 per cent last month, after 2.2 per cent growth in August, leaving consumers with around £100 a year less to spend on non-essential items, the data showed.

This came mainly from sagging nominal income growth, the report said, which hit 1.7 per cent per year, a 21-month low. This, taking into account inflation, translated into real income growth of minus 1.2 per cent – implying consumer budgets are being tightly squeezed.

“Despite the volatility in the data, it is clear that the underlying trend in real incomes is negative despite the fall in inflation from last year’s high,” said Patrick Foley at Lloyds TSB.

“I expect inflation to fall only slightly further over the coming months so any improvement in the situation will need to be driven by growth in incomes,” Foley added, “And this will depend on the wider economy.”

Some measures of consumer sentiment worsened with the fall in real incomes, according to a survey carried out for the report.

Forty-five per cent of respondents said they thought the country’s financial situation was “not at all good,” up from 42 per cent in August. And the number saying money was tight, or that they couldn’t meet monthly bills, edged up from 49 per cent to 50 per cent of respondents to the survey.

But other indices showed slight improvements – there were still more people who thought they wouldn’t have more income in six months than they did now – but the margin was smaller.

“Sentiment towards [personal] finances saw some signs of improvement in September, suggesting people are still finding reason for optimism,” said Jatin Patel at Lloyds TSB.